Dow to gold and dow to silver ratios have been used historically to keep track of inflation adjusted stock indices. Precious metals tend to keep up with stock indices. So when stocks start to price out expensive with limited forward growth, precious metals tend to outperform as central banks will need to increase money supply to re-stimulate after the inevitable post growth slow down.
Silver is interesting because even if the slow down doesnt happen, electrification in good growth times will require silver as an industrial metal, giving to ways to win with silver. Silver as money store of value is good, and silver demand when everything electrifies and robots rule the world.
I have included a Shiller PE chart of the stock market, which shows PEs plus CPI, to show how much more expensive stocks are when you factor in inflation. Inflations or loss of purchasing power hurts companies as well as people. So when inflation hits, companies will seem more expensive and will have to adjust to the reality. Historically, the rule of 20 is a good gauge. The rule of 20 states that inflation adjust PE (price to earnings) ratios plus cpi should be under 20. If PEs and inflation are over 20, it implies stocks are more expensive than they should be, unless they are growing very fast every year. According to many analysts, 2023 could be slower growth. So we shall see how this plays out.
Bottom blue chart is silver 100 ounces compared to dji dow index of dow industrial 30 large cap stocks. SP500 works just as well. But notice how relatively low the silver/dji is historically at the peak of a stock price cycle, and how it relatively outperforms after the stock bubble pops.
Hope you enjoy the data. Cheers!
Silver is interesting because even if the slow down doesnt happen, electrification in good growth times will require silver as an industrial metal, giving to ways to win with silver. Silver as money store of value is good, and silver demand when everything electrifies and robots rule the world.
I have included a Shiller PE chart of the stock market, which shows PEs plus CPI, to show how much more expensive stocks are when you factor in inflation. Inflations or loss of purchasing power hurts companies as well as people. So when inflation hits, companies will seem more expensive and will have to adjust to the reality. Historically, the rule of 20 is a good gauge. The rule of 20 states that inflation adjust PE (price to earnings) ratios plus cpi should be under 20. If PEs and inflation are over 20, it implies stocks are more expensive than they should be, unless they are growing very fast every year. According to many analysts, 2023 could be slower growth. So we shall see how this plays out.
Bottom blue chart is silver 100 ounces compared to dji dow index of dow industrial 30 large cap stocks. SP500 works just as well. But notice how relatively low the silver/dji is historically at the peak of a stock price cycle, and how it relatively outperforms after the stock bubble pops.
Hope you enjoy the data. Cheers!
